US Consumer Debt Reaches Devastating New High

As inflation's grip on the nation continues to tighten, US consumer debt has simultaneously reached a new ceiling.

By Joseph Farago | Published

debit card

Debt is a prevalent force in America, where many citizens owe thousands of dollars to the government for housing, schooling, or general taxes. US consumer debt has unfortunately hit a record high in this country, an abysmal outcome of consecutive pandemic years. As of March 2022, debt reached a whopping $52 billion, a 14% increase from last year.

With consumer debt reaching its highest peak in ages, many are happy to see wages have increased to mitigate overwhelming bills. Even though wages have increased by 5.5% over the last year, people’s general revenue hasn’t offset the climbing inflation. Inflation accelerating at the most considerable rate in 40 years means products, goods, and services cost infinitely more. Unfortunately, a 5% general increase in wages has not been able to stabilize the inflation rates.

A large portion of US consumer debt is from delayed credit card payments. The credit card debt went up by 21.4% from last year. As the combined debt increases in this country, the government won’t make paying off your credit card easier. The Federal Reserve has plans to raise the percentage of those who have delayed payments. If you can’t pay your credit card’s minimum monthly fee, there will be a half-point rate hike due to lateness. The half-point hike will also be attributed to the delayed car and housing loan payments.

Matt Schulz, a credit analyst at Lending Tree, had two possible explanations for the skyrocketing consumer debt. For starters, he believes that the pandemic has exacerbated overall debt in this country. He doesn’t just attribute the debt to a lack of jobs during the lockdown but to a trend in excess spending after the quarantine was lifted. Schulz also noted that another factor for high debt amounts is necessity costs going up exponentially. Many financially crunched individuals have taken out credit cards to pay for general essentials and groceries. If Americans need to take out loans to pay for their necessities, then the US debt will never stop growing.

Housing debt became a substantial part of the US consumer debt in 2021. While affordable housing has been scarce in the wake of the pandemic, many have pulled out thousands of dollars in loans to secure stable homes. General housing prices have gone up by 34% since the pandemic. Besides demand, the housing cost escalation has to do with an increase in necessary materials like lumber. On top of material costs, transportation and shipping have skyrocketed due to fuel demand. With many services and goods extremely expensive in 2022, it’s no wonder housing debt has transformed into a US crisis.

An interesting phenomenon in 2020 impacted the way people withdrew housing loans to pay off their mortgages. Before the pandemic started, mortgage rates were at an all-time low. Potential homeowners start to withdraw massive amounts when mortgage rates are considerably down. As the demand for housing grew during the pandemic, interest rates on buyers’ mortgages increased accordingly. Now, many who withdrew housing loans in 2020 are suffering the consequences of a high-demand market. This has caused many to delay their mortgage payments, spiraling the consumer debt figure into the billions.